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Question for the assignment for the Entrepreneurship Management

As a entrepreneur how will you proceed creating entrepreneur venture and explain the
details on the column.
a. Business planning process, understanding business life cycle and product life cycle.
b. Environment analysis, searching and scanning strength and weakness
c. Identifying problems and opportunities -opportunities and hreats.
d. !efining Business idea, product location and ownership.
e. "tages in starting the new ventures
f. Entrepreneurial #odels - franchises, B$%,&$% 'enture (apital )unding.
CREATING ENTREPRENEURIAL VENTURE
Chapter 1
1.1 U!INE!! PLANNING
Business planning refers to a process of deciding in advance in respect of business
activities. Business planning attempts to provide answers to the following *uestions+
,hat is our present positions, it terms of products, market share, market areas,
etc.
,hat should be our future position, say - years from now.
,hat should be done to reach our future position.
Are we on course to achieve our targets.
!TEP! IN PLANNING PR"CE!!#
1. Ana$%sis of Interna$ En&ironment# The Entrepreneur must analyse the internal
environment prevailing in his firm. /e must analyse the *uality of manpower,
machines, etc. /e must also analyse management-labor relations, working
conditions, management policies and practices, etc. "uch analysis indicates strengths
and weakness of the organi0ation.
'. Ana$%se the E(terna$ En&ironment# he Entrepreneur must analyse the external
environment, which include analysis of government policies, competitors, strategies,
customer preferences, etc. "uch analysis indicates opportunities and threats to the
firm.
). !et Corporate "*+e,ti&es # he entrepreneur must set corporate ob1ectives in line
with mission and vision of the organi0ation. he ob1ectives may be short term 2one
year or so3, medium term 24 to -years3 and long term 2more than - years3.
he ob1ectives must be "#A5 - specific, measurable, attainable, realistic and time
bound.
-. .ormu$ate !trategies# The entrepreneur and his management team must formulate
strategies. A strategy is a long term plan to achieve long term ob1ectives+ the
corporate strategies are framed as follows+
a3 he top management frames the corporate strategy
b3 he divisional heads frame division wise business strategy
c3 he departmental heads frame the functional strategies.
d3 he lower level managers frame operational strategies.
/. Ana$%sis of !trategies0P$an # he management must analyse the strategies and
plans. (ost-benefit analysis must be conducted of each and every strategy or plan.
(osts can be analy0ed in terms of production, distribution, and administration
expenses. Benefits can be analy0ed in terms profits, market share, sales, goodwill,
E(
1. !e$e,tion of est !trateg%# The management or entrepreneur must select the best
strategy or plan. he best strategy is the one which fulfills the following conditions+
a3 It is in line with the mission statement of the organi0ation.
b3 It fits with the internal environment of the organi0ation.
c3 It is relevant in terms of external environment.
After selection of the best strategy, the management must frame plans and
programmes to implement the strategy. he plans and programmes may be in respect
of 5esearch 6 !evelopment, raining 6 !evelopment, etc.
7. Imp$ementation # The Entrepreneur must make suitable arrangement to implement
the strategy. Implement of strategy involves+
a3 %rgani0ing and allocation of resources to various activities.
b3 !irecting and motivating the subordinates to perform effectively.
2. Re&ie3# here must be period review of performance. he reviews is re*uired to ind
out whether the organi0ation is on right track to achieve ob1ectives. If re*uired necessary
modifications may be made in the strategy.
1.' U!INE!! LI.E C4CLE
A business goes through stages of development similar to the life cycle of humans, each
phase or stages re*uires different approaches to be successful . Each phase poses a
different challenge, and therefore, there is a need to adopt a different approach or strategy
to face that challenge. he phases of business life cycle are briefly explained as follows+
he top management frames the corporate strategy
he divisional heads frame division wise business strategy
he departmental heads frame the functional strategies.
he lower level managers frame operational strategies.
The 5 !tages of the usiness Life C%,$e
T6E !EVEN !TAGE! ". U!INE!! LI.E C4CLE
1. !ee7 !tage# his stage begins when a person generates idea to set up a business.
his stages involves the conception or birth of a new business
a8 Cha$$enge # At this stage, there is a need to overcome the challenge of market
acceptance. herefore, it is advisable for small entrepreneurs to look for a niche
market or a small market area . "mall units have to avoid spreading their money
and resources on number of products8 markets.
*8 .o,us# here is a need to focus on that business opportunity which matches with
your skills, experience and passion. %ther focal points include deciding on a
business ownership structures finding professional advisers, and business
planning.
,8 Mone% sour,es# Initially, the businessman must rely on owned funds 2funds of
promoters and borrowings friends and family 3. %ther potential sources include
suppliers, customers and governments grants. )or innovative pro1ects, venture
capitalists may provide finance.
78 9N pro7u,ts to ,onsi7er# (lassic (hecking Account 8 Business "avings
Account 8"BA 5esources 8 #innesota "B!( 8 #innesota (ommunity (apital
)und.
9. !tart:Up !tage# At this stages business begins to operate. $roducts or services are in
production and the firm gets its first customers.
a8 Cha$$enge # At this stages, the firm may face a cash flow crisis because the set-
up costs and unexpected expenses cause a huge drain on cash resources. he
firm may not get profits. he main challenge is to survive and stay in business.
At this stages, the entrepreneur must check to see if business is on the right track.
*8 .o,us # !tart:Ups re*uired establishing a customer base and market presence
along with tracking and conserving cash flow.
,8 Mone% !our,es # %wner, friend, family, suppliers, credits customers, dealers,
advances, or grants.
78 9N pro7u,ts to ,onsi7er# "eed "tage $roducts 8 ,orking (apital :oan 8 :ine
of (redit8 E*uipment )inancing 8 Business Internet Banking 8 Bill $ayer 8 (redit
(ard $rocessing.
4. Gro3th !tage# At this stage, there may be sharp increase in sales. 5evenues and
customers may increase, especially, if the product is innovative. he firm may start
getting profits, but at the same time competition may surface. he firm may re*uire ma1or
investments and more staff and the resources necessary to support the increased sales
volume.
a8 Cha$$enge# he biggest challenge growth companies face is dealing with the
constant range of issues, demanding far more time and money. Effective
management is re*uired and a possible new business plan. here is a need to
train and delegate to con*uer this stage of development.
*8 .o,us # he firm needs to maintain and enhance customer relations. )ocus needs
to be placed on promotional activities. Better accounting and management
systems will have to be set-up. ;ew employees will have to be hired to deal with
the increase in customers.
,8 Mone% !our,es# Banks, profits 2 ploughed back3, investors and leasing options.
78 9N pro7u,ts to ,onsi7er# :ine of (redit 8 E*uipment
)inancing 8 (onstruction :oan 8(ommercial 5eal Estate :oan 8 /ealth "avings
Account 8 5emote !eposit 8 (ash #anagement 8 Business (redit (ard.
<. Esta*$ishe7 stages At this stage, the firm may have strong foothold in the market
place with loyal customers. "ales growth may be stable and managerial with the available
staff and resources.
a3 Cha$$enge# It is far too easy to rest on your laurels during this life stage. =ou
have worked hard and have earned a rest but the marketplace is relentless and
competitive. "tay focused on the bigger picture. Issues like the economy,
competitors or changing customer tastes can *uickly end all you have work for.
b3 .o,us# An established life cycle company will be focused on improvement and
productivity. o compete in an established market, you will re*uire better
business practices along with automation and outsourcing to improve
productivity.
c3 Mone% !our,es# $rofits, banks, investors and government.
d3 9N pro7u,ts to ,onsi7er# $remium (hecking Account 8 Business #oney
)und Account 8 "weep Account 8 $rivate )inancial 8 <>?& $lanning 8 Investment
Brokerage 8/ealth "avings Account 8 5emote !eposit 8 (ash
#anagement 8 Business (redit (ard 8:ine of (redit.
-. E(pansion# his life cycle is characteri0ed by a new period of growth into new
markets and distribution channels. his stage is often the choice of the business owner to
gain a larger market share and find new revenue and profit channels.
a8 (hallenge+ #oving into new markets re*uires the planning and research of a
seed or start-up stage business. )ocus should be on businesses that complement
your existing experience and capabilities. #oving into unrelated businesses can
be disastrous.
*8 )ocus+ Add new products or services to existing markets or expand existing
business into new markets and customer types.
,8 #oney "ources+ @oint ventures, banks, licensing, new investors and partners.
78 ,;B products to consider+ Ac*uisition )inancing 8 $rivate )inancial 8 :ine of
(redit 8E*uipment )inancing 8 (onstruction :oan 8 (ommercial 5eal Estate
:oan 8 Investment Brokerage.
A. Mature stages# =ear over year sales and profits tend to be stable, however
competition remains fierce. Eventually sales start to fall off and a decision is needed
whether to expand or exit the company.
a8 Cha$$enge# Businesses in the mature stage of the life cycle will be challenged
with dropping sales, profits, and negative cash flow. he biggest issue is how
long the business can support a negative cash flow. Ask is it time to move back
to the expansion stage or move on to the final life cycle stage...exit.
*8 .o,us# "earch for new opportunities and business ventures. (utting costs and
finding ways to sustain cash flow are vital for the mature stage.
,8 Mone% !our,es# "uppliers, customers, owners, and banks.
78 9N pro7u,ts to ,onsi7er# $rivate )inancial 8 <>?& $lanning 8 Employee
"tock %wnership $lans 2E"%$3 8 Investment Brokerage 8 /ealth "avings
Account 8 5emote !eposit 8 (ash #anagement 8 :ine of (redit.
7. E(it stages# his is the big opportunity for your business to cash out on all the effort
and years of hard work. %r it can mean shutting down the business.
a8 Cha$$enge# "elling a business re*uires your realistic valuation. It may have been
years of hard work to build the company, but what is its real value in the current
market place. If you decide to close your business, the challenge is to deal with
the financial and psychological aspects of a business loss.
*8 .o,us# Bet a proper valuation on your company. :ook at your business
operations, management and competitive barriers to make the company worth
more to the buyer. "et-up legal buy-sell agreements along with a business
transition plan.
,8 Mone% !our,es# )ind a business valuation partner. (onsult with your
accountant and financial advisors for the best tax strategy to sell or close-out
down business.
78 9N pro7u,ts to ,onsi7er# Ac*uisition )inancing 8 Employee "tock
%wnership $lans 2E"%$3 8 Investment Brokerage 8 rust.
Each stage of the business life cycle may not occur in chronological order. "ome business
may *uickly go burst immediately after the start-up stage. %ther, may choose to avoid
expansion and stay in the established stage.
PR";UCT LI.E C4CLE
$roducts like people have a life cycle. "ome may have a short life cycle, whereas, other
may en1oy a long life. Pro7u,t $ife ,%,$e refers to the progression or ,ourse of a
pro7u,t<s sa$es an7 profits o&er its $ife time. A product may pass through five stages+
$roduct !evelopment
Introduction
Browth
#aturity
!ecline
It is to be noted that a product may not pass through all the five stages. )or instance, a
product may be developed, introduced and then withdrawn from the market. Also, a
relaunched product will have a new life cycle.
PR";UCT ;EVEL"PMENT !TAGE#
he first stages begins when an idea is developed or conceived to launch a product. his
stage is characteri0ed by+
;o sales and as such no profits.
Investment in 5esearch and !evelopment.
est marketing may be considered.
INTR";UCTI"N !TAGE#
his stage marks the entry of the product in the market. Introduction stage characteri0ed
by+
:ow sales.
/igh promotional expenditure.
:oss or negligible profits.
GR"9T6 !TAGE! #
;uring this stages the product is poised for growth. his stage is characteri0ed by +
5apid growth in sales.
5ise in profits
Intensive promotional effort.
Increasing competition.
Introduction of more product models.
MATURIT4 !TAGE#
A this stage, the product is well settled in the market along with the competitors. he
brand is well known and the customer is made more brand conscious. At this stage, the
marketer may resort to brand extension. his stage is characteri0ed by+
"tagnation of sales.
!ecline in profits.
5etentive or reminder advertising.
Intense competition.
;ECLINE !TAGE#
In the last stages, sales decline due to the entry of new and improved products or due to
change in consumer preferences or habits. he marketer may reposition the product with
a different appeal. his stages is characteri0ed by+
!ecline in sales.
!ecline in profits at a rapid pace.
#inimum promotional effort.
5epositioning of product
,ithdrawal or modification in product.
ENVIR"NMEMTAL ANAL4!I!
Environment refers to all those factors or factors that influence various decisions of the
firm. A firmCs environment consists of internal environment and external environment.
he internal environment analysis helps to identify the strengths and weakness. he
external environment analysis helps to identify opportunities and threats, and which are
hidden in the environmental events and trends. %rgani0ation have to identify such forces
and accordingly interact and ad1ust its strategies, so as to consolidate its strengths and
minimi0e its weakness and to grab the opportunities and to minimi0e the threats.
5%:E8I#$%5A;(E
Environment analysis enables a business firm to identify its strengths, weakness,
opportunities,and threats. Environmental influences must be identified and analy0ed
individually and collectively to determine their real and potential effects on an
organi0ation. An organi0ation is a part of a complex wordD it does not exists in isolation,
and therefore, it needs to scan the environment in which it operates. $roper environment
analysis helps a firm to formulate effective strategies in the various functional areas.
he importance or role of scanning business environment is briefly stated as follows+
?3 I7entifi,ation of strengths# he analysis of the internal environment helps to
identify the strengths of the firm. Every organi0ation must strive to maintain and
improve on its strengths. he following instances indicate the strengths. he
following instances indicate the strength of a business firm+
a3 he employees are competent and dedicated.
b3 $ersonnel polices 2selection, training, promotion, etc3 are employees-cum-
organisation oriented.
c3 echnology used by firm leads to lower cost of production.
d3 ,orking conditions and welfare facilities generate 1ob satisfaction.
93 I7entifi,ation of 3ea=nesses# The ana$%sis of the internal environment indicates
not only strengths but also weakness of the firm. he firm should identify its weakness
and correct them as early as possible.
)or instance, the machines used may be outdated, and therefore, they must be replaced
with new ones. Also, employees may lack competences and dedicationD the firm may
provide training and motivate them as early as possible.